How to reduce employee costs by suspending the application of a collective labour agreement?

A week ago I wrote on how to apply Art. 9¹ of the Labour Code to reduce employee costs at the company [see the article here]. 

Today, we will have a look at another solution stemming from Art. 241²⁷ of the Labour Code. This regulation is a short fragment of a broader code regulation providing for the suspension of a corporate right at all. The suspension of such a right stems from Art. 9¹ of the labour Code, which does not refer, however, to the suspension of a collective labour agreement. As this issue is provided for in Art. 241²⁷ of the Labour Code.

§ 1 reads as follows: “Given the financial standing of the employer, parties to the company collective labour agreement may agree on suspending, fully or partially, the company and/or intragroup collective labour agreement with regard to a given employer for no more than 3 years. If there is only an intracompany agreement binding on the employer, the agreement on the suspension of such an intracompany agreement or some of regulations thereof may be entered into by parties entitled to enter into the collective agreement”.

This means that the employer’s difficult financial standing is a condition precedent to have the company or intragroup collective labour agreement suspended. Although this regulation refers solely to “financial standing” of the employer, there is no doubt that it means a bad financial standing of the employer.

A party to the collective labour agreement that takes the initiative to enter into the agreement should present, together with such a proposal, objective data confirming the employer’s bad or worsening financial standing. In practice, a party that usually takes the initiative to enter into such an agreement is the employer, which often has to face a dilemma of collective redundancy or the worsening of conditions of employee remuneration guaranteed in the collective labour agreement. The assessment of the employer’s financial standing which forms the basis for suspending the application of labour law regulations is not subject to court control.

The agreement may suspend both the company and intragroup collective labour agreement binding on the employer.

The agreement may only be entered by parties to the collective labour agreement. In the event the intragroup agreement is suspended and it is the only collective agreement binding on the employer, the agreement suspending the collective agreement may be entered into by parties entitled to enter into the company collective agreement. The company collective labour agreement must not be suspended, however, by parties to the intergroup collective labour agreement.

The parties may agree to suspend the whole or part of the company or intergroup collective labour agreement. In exceptional cases, the parties may suspend the application of selected regulations of the collective labour agreement, e.g., those applicable to employee remuneration rules. The suspension agreement may apply solely to the terms of employment stemming from the collective labour agreement or agreements. The suspension of the company collective labour agreement must not result in the application of terms of employment that are less favourable than those guaranteed by statutory regulations. The parties must not interfere in employee guarantees set out in commonly applicable legal regulations (e.g., Labour Code).

The agreement on the suspension of the collective labour agreement applies to all employees that are subject to the collective labour agreement, unless the parties explicitly exclude a specific group of employees.

In addition, the suspension agreement should provide for its term, which should not exceed 3 years.

Given Art. 241²⁷ § 2 of the Labour Code, the suspension agreement must be registered in the register of company or intergroup collective labour agreements. If the parties suspended the intercompany collective labour agreement, they must inform the parties of such an agreement.

The execution of the suspension agreement brings about consequences to the content of an employment relationship, which is established on the basis of contractual terms and conditions of both the intercompany and company collective labour agreement. Pursuant to Art. 241²⁷ § 3 of the Labour Code: “To the extent and during the period set out in the agreement referred to in § 1 above, no terms and conditions of employment contracts stemming from the intragroup or company collective labour agreement and other acts based on which the employment relationship is established are applied by law.”

Thus, the suspension agreement may reduce or even exclude terms of employment and remuneration that have been negotiated and agreed between the employee and employer in the employment contract. Therefore, the suspension agreement may, for example, suspend those regulations of the collective labour agreement that apply to a bonus, which is an element of the employee’s existing pay, for the period set forth in the suspension agreement. During the term of the suspension agreement, the employee will not receive such a benefit. The employer will not be obliged to pay that benefit after the term of the suspension agreement as the suspension agreement does not defer the payment of benefits stemming from the company regulations, but causes that the right to such benefits does not exist in the employment contract for the period set out in the suspension agreement. The bonus will again form a component of the employment contract upon the end of the suspension period. This does not apply, however, if the benefit does not stem from the company regulations, but is directly stipulated in the employment contract or if the agreement on the full or partial suspension of the collective labour agreement provides otherwise.

To suspend regulations of the collective labour agreement, it not necessary to make an amendment notice or an amendment agreement as it is made by law. After the end of the period of suspension of regulations of the collective labour agreement, the original terms and conditions of the employment contract are recovered.

Marta Strzecha-Bociąga, Attorney-at-law